A Nobel Prize is a much sought and much respected award presented to some of the most brilliant people on this planet. When they started giving out the prizes in 1901, the selected categories were physics, chemistry, medicine, literature and peace. That last one is a bit ironic. Albert Nobel, the man behind the eponymous award, made his money from inventing stuff like dynamite and gelignite!
In 1968, they added Economic “Sciences”. Now I always thought that “scientists” promoted their vocation using terms like “scientific facts”, etc. But when you look into economics, there are, in fact, very few “facts”, and a whole bunch of guesswork.
I start with the Nobel Prize stuff, because I want to convey that those individuals are (supposedly) extremely intelligent. And, to be honest, I have found a couple of the more recent recipients (on the economics side) actually write some interesting stuff from time to time - I know, I know, I can lapse into being a bit of a nerd.
A little digression here: I should clarify that the notion the Nobel Prize is one of top achievements in the world is another example of pure “western” bias. I’m sure that there are constant ongoing analyses on other economic systems but they never seem to get the nod for a Nobel!?
So the economics prize has been awarded for work in the field of capitalism, and we all know (or will do momentarily) that the “bible” of capitalism is a tome penned by Adam Smith entitled (in short form) Wealth of Nations (first published in 1776 coincidentally!).
Many of the ideas expressed by Smith still form the underpinnings of today’s classical economic thinking and (don’t forget) policy making. And form the basis for those Nobel Prize winning submissions from these brilliant minds.
One of Smith’s ideas - and I’m liberally paraphrasing here - is that in the “marketplace” there is an “Invisible Hand” that essentially moves buyers and sellers together to find an equilibrium. And this notion has persisted to this day - the premise that we humans, in our “commercial” lives, are exposed to the vagaries of an “unknown” force that will determine the price of something. A notion supported by aforementioned Nobel Prize winners, policy makers and academics from the most respected universities in our western world.
Which, of course, is absolute bolloxology. Complete and utter bull.
There is no “invisible hand”. What moves buyers and sellers together (among other essential things like information) are decisions made by the participants. These are conscious acts that dictate how much a producer is willing to sell at, and how much a consumer is willing to pay for what is being offered. Period. End of.
There is no mysterious figure moving around in the ethereal poking the business owner to randomly select a price while simultaneously nudging the buyer to part with that amount of money. It’s insane to think that!
Can you imagine the CEO of a multi-billion dollar company looking over the reports one morning when she sees a big jump in revenue, and she asks her CFO “what’s this?” and the answer she gets back, with a shrug of the shoulders, is “I dunno. It must be the invisible hand”! And, unfortunately, as the spouse tries to explain the impulse purchase with “I just don’t know. Something just came over me”, the reality is that a conscious decision was made, and to suggest otherwise is disingenuous at the very least.
And to read all this concern about “inflation”, as this mysterious force that must be “tamed” by actions by the federal government and the Central Bank, is disturbing. Prices just don’t go up supernaturally. Folks aren’t outside Walmart waving wads of cash trying to outbid each other on a gallon of milk. They go up because a seller makes a conscious decision to increase their prices based on information received.
And those decision makers, believe it or not, are people who get a lot of their information from the same sources as you and I - tv, internet, magazines etc. - you know: good ‘ol media. And, currently, they see that the government is pumping trillions of extra dollars into the economy. They see that many outlets for discretionary spending are closed, and that bank balances in that mass of population that is defined as the “middle class” are growing a little, and thus, they see an “opportunity” to increase their wellbeing at the expense of others.
And so, company A ups its prices and, in the short term, gets a reward in terms of a lift in revenues. Company B sees this and says “I’ll have some of the same”, the Company C, etc., etc. And consumers will pay.
Consumers will pay because the goods and services that are hit the hardest in “inflationary times” are those that fall into the “necessities” basket (economists love the basket metaphor) and have little choice over the matter. Inflation is not an issue when buying a BMW or Tesla - the price increases are built into meaningless add ons with each new model.
And isn't it interesting that the whispers of impending “inflation” comes at a time when Joe Biden is threatening to increase taxes on the rich and on corporations? Since 1980, the average inflation rate in the US is under 3%. During that time, starting with the 46% rate in 1980, corporate tax rates have dropped down to the Trump “inspired” 21% - more than halved!!!
So the corporations were pumping their bottom lines with the benefits of lower tax rates, and there was no real need to jack prices. And when Trump injected an additional (estimated) $1.5 to $2 trillion into the economy via corporate tax cuts in 2017, there wasn’t a whisper of inflation - nor indeed of the additional burden on the national debt.
But now Biden is threatening to raise those tax rates, all of a sudden, we hear the inflationary rumblings. Give me…..No. Give us ALL a break! Inflation isn’t “too much money chasing too few goods’ aided by the supernatural “invisible hand”.
Call it what it is: “Inflation” is a period of carefully considered (for the benefit, one would assume, of ownership) decisions by sellers in the market place to take advantage of consumers. And on that premise then, inflation is totally controllable. Don’t be trying to sell some metaphysical bullshit to cover up what is, essentially, greed.
Now some of these aforementioned economic gurus might take issue with me and suggest that the actual machinations of the marketplace are more complex and beyond the understanding of a mere mortal like myself. To which I answer this:
I can read or listen to any media outlet, much the same as anyone can. I can also comprehend and synthesize the information offered. And I can tell you that this treatise here is marginally above the level of that media content, and this “simplistic” view is what they are selling to their respective audiences: in the capitalist society, we are subject to incorporeal price movements that, in the cumulative, lead to this shifting of resources from the individual to the corporation called inflation.
Which is tantamount to really believing in the tooth fairy.